Removing the rotten—finally, it's the turn of the Web3 giants
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Removing the rotten—finally, it's the turn of the Web3 giants
What Can We Learn from Over a Decade of Web2 Giants "Removing the Rotten"?
Navigating Web3 tides with focused insightsAuthor: flowie, ChainCatcher
Web3 giants are finally starting to formally "purge corruption."
This morning, Binance reported that an employee used insider information from their former position to conduct insider trading and profit. The individual has now been suspended and may face legal consequences. While allegations of internal corruption at Binance are nothing new, this marks the first time Binance has publicly disclosed details about such misconduct—signaling a formal move toward "corruption cleansing."
Following Binance's lead in penalizing employees for insider trading, exchanges like Huobi have also stated they will follow suit. However, compared to Web2 giants that routinely enforce anti-corruption measures, Web3 companies are only just beginning their journey toward systematic integrity.
Public Disclosure of Insider Trading: Has Corruption Purging in Crypto Finally Begun?
According to Binance’s announcement, this case originated from a whistleblower report two days prior.
The involved employee was part of the recently launched Binance Wallet team. Previously serving in business development at BNB Chain, they leveraged privileged information obtained from their prior role to purchase tokens of a project ahead of time, then quickly sold after the official announcement, reaping substantial profits.
In response, Binance has suspended the employee and may pursue legal action. The four whistleblowers who filed the report were collectively rewarded $100,000, and Binance has provided an official channel for community reporting.
However, this employee's insider trading might have already been exposed publicly by several Twitter users before Binance received the formal report.
@pycharts and @BroLeonAus shared on-chain evidence directly implicating Freddie Ng, a BD and growth staff member from Binance Wallet, in a "pump-and-dump" scheme involving the token $UUU.
@BroLeonAus detailed the alleged misconduct, stating that Freddie Ng likely knew in advance that $UUU would be pumped. Using a burner address, he purchased $312,000 worth of $UUU with 10 BNB shortly after market opening, transferred all holdings to a money-laundering wallet, and then sold at high prices via Bitget wallets—making an initial profit of 181.4 BNB (approximately $110,000).
Additionally, Freddie Ng distributed the remaining $UUU across eight different addresses, each holding tens of thousands of dollars’ worth. He was eventually caught because the wallet used to buy the presale tokens was linked to his verified account freddieng.bn, which had been registered 121 days earlier.
Allegations of exchange employees abusing their positions for insider trading are not uncommon in the crypto space. Each public scrutiny or tip-off pushes Binance to strengthen its anti-corruption efforts.
Back in February last year, RON’s sharp drop after listing on Binance sparked suspicions of insider trading. Although Binance dismissed it as a misunderstanding, the incident prompted them to issue a formal statement emphasizing their commitment to combating corruption.
Binance outlined three main anti-corruption measures: strengthening management and fire-walling of listing teams; canceling listings if information leaks occur; and offering rewards to incentivize public reporting.
Earlier this year, a Medium post by an author using the pseudonym Qwertyuiopasdfghj published an open letter accusing Binance Labs (now renamed YZi Labs) of serious internal corruption, alleging collusion between senior Binance Labs executives and portfolio projects for illicit gains.
While Binance did not publicly investigate or disclose findings regarding this claim, following the rebranding of Binance Labs to YZi Labs, they noted that all lab personnel information is publicly available, inviting anyone with evidence to come forward—including direct reporting to CZ (Changpeng Zhao) or He Yi.
He Yi mentioned during a Space session earlier this year that Binance had conducted over 120 internal audits in the past two years, terminated more than 60 employees for violations, and recovered over $30 million in illicit gains.
Yet Binance has historically refrained from disclosing specifics of corruption cases. The recent revelation of insider trading within the Binance Wallet team could signal a shift—a turning point in Binance’s approach. Amid diminishing wealth effects and increasing regulatory pressure, public accountability may be one of the best ways for top-tier exchanges like Binance to regain community trust.
Web2 Giants Have Been Fighting Corruption for Over a Decade—What Lessons Can Be Learned?
Corruption remains a persistent challenge for large corporations. Compared to Web3 firms, traditional Web2 tech giants have spent over a decade institutionalizing anti-corruption practices, making them routine.
Since Alibaba established its Group Integrity & Compliance Department in 2012 to combat internal corruption, other internet giants have followed. These companies commonly employ several key anti-corruption strategies:
In terms of oversight, they set up dedicated investigation departments, establish internal reporting systems, and often regularly publish anti-fraud bulletins.
JD.com established a dedicated anti-corruption reward fund of 10 million yuan annually to incentivize reporting of individual or organizational misconduct. Recently, ByteDance released its 2024 fraud report, detailing the number of employees dismissed or referred to judicial authorities, types of violations, and high-risk areas—such as procurement corruption, monetization of technical privileges, embezzlement, and illegal data trading.
Internet companies also initiate joint actions and blacklisting mechanisms. For example, Tencent, Baidu, Meituan, JD.com, and others co-founded the Sunlight Integrity Alliance, now comprising nearly 800 enterprises, which share databases of untrustworthy employees.
Moreover, these firms leverage big data and artificial intelligence to monitor and analyze internal operations in real time, enabling early detection and intervention. For instance, ByteDance built a proprietary database allowing compliance officers to retrieve data, while its system automatically flags risks and alerts relevant managers.
Besides monitoring, companies conduct regular internal training to enhance employee awareness of compliance.
Compared to Web2, Web3 exchanges like Binance operate in financial trading environments where employees have greater incentives and opportunities for corruption. Therefore, Web3 leaders must take the initiative to make anti-corruption efforts systematic and routine.
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